FICO Announces Earnings of $3.95 per Share for Second Quarter Fiscal 2022 - Fair Isaac (NYSE:FICO)

Revenue of $357 million vs. $331 million in prior year

FICO FICO, a leading predictive analytics and decision management software company, today announced results for its second fiscal quarter ended March 31, 2022.

Second Quarter Fiscal 2022 GAAP Results

Net income for the quarter totaled $104.4 million, or $3.95 per share, versus $68.7 million, or $2.33 per share, in the prior year period.

Net cash provided by operating activities for the quarter was $122.6 million versus $153.5 million in the prior year period.

Second Quarter Fiscal 2022 Non-GAAP Results

Non-GAAP Net Income for the quarter was $123.7 million versus $90.2 million in the prior year period. Non-GAAP EPS for the quarter was $4.68 versus $3.06 in the prior year period. Free cash flow was $120.2 million for the current quarter versus $152.3 million in the prior year period. The Non-GAAP financial measures are described in the financial table captioned "Non-GAAP Results" and are reconciled to the corresponding GAAP results in the financial tables at the end of this release.

Second Quarter Fiscal 2022 GAAP Revenue

The company reported revenues of $357.2 million for the quarter as compared to $331.4 million reported in the prior year period.

"We continue to deliver strong results in an uncertain economic environment," said Will Lansing, chief executive officer. "We're delivering strong top-line growth, and our focus on efficiency has enabled us to deliver expanded margins."

Revenues for the second quarter of fiscal 2022 across the company's two operating segments were as follows:

Scores revenues, which include the company's business-to-business (B2B) scoring solutions, and business-to-consumer (B2C) scoring solutions, were $183.7 million in the second quarter, compared to $168.7 million in the prior year period, an increase of 9%. B2B revenue increased 5%, driven largely by unit price increases and increases in unsecured Originations volumes, partially offset by decreases in Mortgage Origination volumes. B2C revenue increased 18% from the prior year period due to growth at myFICO.com, as well as through our partners.
Software revenues, which include the company's analytics and digital decisioning technology, as well as associated professional services, were $173.5 million in the second quarter, compared to $162.6 million in the prior year period, an increase of 7%, primarily attributable to an increase in point-in-time recognition due to a large license deal, partially offset by the sale of the Debt Collections and Recovery product line in June 2021.
- Year-over-year, Software Annual Recurring Revenue (ARR) was up 11%, consisting of 60% platform ARR growth and 4% non-platform ARR growth. Software Dollar-Based Net Retention Rate was 110% in the second quarter, with platform solutions at 141% and non-platform solutions at 103%.

Outlook

The company is updating its previously provided guidance for fiscal 2022:

	Previous Fiscal 2022 Guidance	Updated Fiscal 2022 Guidance
Revenues	$1.35 billion	$1.355 billion
GAAP Net Income	$318 million	$350 million
GAAP EPS	$11.29	$13.11
Non GAAP Net Income	$397 million	$429 million
Non GAAP EPS	$14.12	$16.08

The Non-GAAP financial measures are described in the financial table captioned "Reconciliation of Non-GAAP Guidance."

Company to Host Conference Call

The company will host a webcast today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) to report its second quarter fiscal 2022 results and provide various strategic and operational updates. The call can be accessed at FICO's web site at www.fico.com/investors. A replay of the webcast will be available at our Past Events page through April 27, 2023.

About FICO

FICO FICO powers decisions that help people and businesses around the world prosper. Founded in 1956, the company is a pioneer in the use of predictive analytics and data science to improve operational decisions. FICO holds more than 165 US and foreign patents on technologies that increase profitability, customer satisfaction and growth for businesses in financial services, telecommunications, health care, retail and many other industries. Using FICO solutions, businesses in more than 100 countries do everything from protecting 2.6 billion payment cards from fraud, to helping people get credit, to ensuring that millions of airplanes and rental cars are in the right place at the right time.

Learn more at http://www.fico.com

Join the conversation at https://twitter.com/fico & http://www.fico.com/en/blogs/

FICO is a registered trademark of Fair Isaac Corporation in the US and other countries.

Statement Concerning Forward-Looking Information

Except for historical information contained herein, the statements contained in this news release that relate to FICO or its business are forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including the impact of COVID-19 on macroeconomic conditions and FICO's business, operations and personnel, the success of the Company's business strategy and reengineering initiative, the maintenance of its existing relationships and ability to create new relationships with customers and key alliance partners, its ability to continue to develop new and enhanced products and services, its ability to recruit and retain key technical and managerial personnel, competition, the effects of, and any changes in, laws and regulations applicable to the Company's business or its customers, the failure to protect data privacy and security, the failure to realize the anticipated benefits of any acquisitions or divestitures, and material adverse developments in global economic conditions or in the markets we serve. Additional information on these risks and uncertainties and other factors that could affect FICO's future results are described from time to time in FICO's SEC reports, including its Annual Report on Form 10-K for the year ended September 30, 2021 and its subsequent filings with the SEC. If any of these risks or uncertainties materializes, FICO's results could differ materially from its expectations. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. FICO disclaims any intent or obligation to update these forward-looking statements, whether as a result of new information, future events or otherwise.

FAIR ISAAC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)



	March 31,			September 30,
		2022			2021
ASSETS:
Current assets:
Cash and cash equivalents	$	174,219		$	195,354
Accounts receivable, net		273,356			312,107
Prepaid expenses and other current assets		34,634			43,513
Total current assets		482,209			550,974

Marketable securities and investments		32,592			33,196
Property and equipment, net		22,897			27,913
Operating lease right-of-use-assets		43,256			47,275
Goodwill and intangible assets, net		786,751			792,284
Other assets		118,780			116,134
	$	1,486,485		$	1,567,776

LIABILITIES AND STOCKHOLDERS' DEFICIT:
Current liabilities:
Accounts payable and other accrued liabilities	$	88,456		$	100,284
Accrued compensation and employee benefits		61,825			103,506
Deferred revenue		102,481			105,417
Current maturities on debt		130,000			250,000
Total current liabilities		382,762			559,207

Long-term debt		1,664,674			1,009,018
Operating lease liabilities		47,362			53,670
Other liabilities		55,103			56,823
Total liabilities		2,149,901			1,678,718

Stockholders' deficit		(663,416	)		(110,942	)
	$	1,486,485		$	1,567,776

FAIR ISAAC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)


	Quarter Ended						Six Months Ended
	March 31,						March 31,
		2022			2021			2022			2021
Revenues:
On-premises and SaaS software	$	149,088		$	125,551		$	275,426		$	252,006
Professional services		24,365			37,091			50,901			78,399
Scores		183,742			168,719			353,229			313,370
Total revenues		357,195			331,361			679,556			643,775

Operating expenses:
Cost of revenues		71,794			88,333			140,997			177,861
Research & development		36,387			43,612			75,367			84,263
Selling, general and administrative		96,414			97,272			194,462			191,183
Amortization of intangible assets		543			945			1,087			1,882
Gains on product line asset sales and business divestiture		-			-			-			(7,334	)
Total operating expenses		205,138			230,162			411,913			447,855
Operating income		152,057			101,199			267,643			195,920
Other expense, net		(19,572	)		(9,375	)		(30,338	)		(16,136	)
Income before income taxes		132,485			91,824			237,305			179,784
Provision for income taxes		28,102			23,150			47,963			24,618
Net income	$	104,383		$	68,674		$	189,342		$	155,166



Basic earnings per share:	$	3.99		$	2.36		$	7.10		$	5.33
Diluted earnings per share:	$	3.95		$	2.33		$	7.02		$	5.23

Shares used in computing earnings per share:
Basic		26,145			29,087			26,662			29,107
Diluted		26,421			29,531			26,978			29,660

FAIR ISAAC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)


	Six Months Ended
	March 31,
		2022			2021
Cash flows from operating activities:
Net income	$	189,342		$	155,166
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		10,656			13,701
Share-based compensation		57,814			53,338
Changes in operating assets and liabilities		(25,523	)		11,188
Other, net		15,195			(1,923	)
Net cash provided by operating activities		247,484			231,470

Cash flows from investing activities:
Purchases of property and equipment		(3,293	)		(4,220	)
Net activity from marketable securities		(2,628	)		(2,115	)
Proceeds from product line asset sales and business divestiture		2,257			8,291
Other, net		-			(210	)
Net cash provided by (used in) investing activities		(3,664	)		1,746

Cash flows from financing activities:
Proceeds from revolving line of credit and term loan		800,000			251,000
Payments on revolving line of credit and term loan		(806,750	)		(121,000	)
Proceeds from issuance of senior notes		550,000			-
Proceeds from issuance of treasury stock under employee stock plans		11,117			10,390
Taxes paid related to net share settlement of equity awards		(47,849	)		(86,653	)
Repurchases of common stock		(760,861	)		(250,356	)
Other, net		(8,819	)		(176	)
Net cash used in financing activities		(263,162	)		(196,795	)

Effect of exchange rate changes on cash		(1,793	)		4,021

Increase (decrease) in cash and cash equivalents		(21,135	)		40,442
Cash and cash equivalents, beginning of period		195,354			157,394
Cash and cash equivalents, end of period	$	174,219		$	197,836

FAIR ISAAC CORPORATION
NON-GAAP RESULTS
(In thousands, except per share data)
(Unaudited)


	Quarter Ended						Six Months Ended
	March 31,						March 31,
		2022			2021			2022			2021

GAAP net income	$	104,383		$	68,674		$	189,342		$	155,166
Amortization of intangible assets		543			945			1,087			1,882
Gains on product line asset sales and business divestiture		-			-			-			(7,334	)
Stock-based compensation expense		27,936			28,206			57,814			53,338
Income tax adjustments		(6,677	)		(7,271	)		(14,170	)		(11,757	)
Excess tax benefit		(2,495	)		(329	)		(8,452	)		(19,512	)
Non-GAAP net income	$	123,690		$	90,225		$	225,621		$	171,783


GAAP diluted earnings per share	$	3.95		$	2.33		$	7.02		$	5.23
Amortization of intangible assets		0.02			0.03			0.04			0.06
Gains on product line asset sales and business divestiture		-			-			-			(0.25	)
Stock-based compensation expense		1.06			0.96			2.14			1.80
Income tax adjustments		(0.25	)		(0.25	)		(0.53	)		(0.40	)
Excess tax benefit		(0.09	)		(0.01	)		(0.31	)		(0.66	)
Non-GAAP diluted earnings per share	$	4.68		$	3.06		$	8.36		$	5.79

Free cash flow
Net cash provided by operating activities	$	122,603		$	153,523		$	247,484		$	231,470
Capital expenditures		(2,398	)		(1,175	)		(3,293	)		(4,220	)
Free cash flow	$	120,205		$	152,348		$	244,191		$	227,250

Note: The numbers may not sum to total due to rounding.


About Non-GAAP Financial Measures


To supplement the consolidated GAAP financial statements, the company uses the following non-GAAP financial measures: non-GAAP net income, non-GAAP EPS, and free cash flow. Non-GAAP net income and non-GAAP EPS exclude the impact of amortization expense, share-based compensation expense, restructuring and acquisition-related, excess tax benefit, and adjustment to tax valuation allowance items. Free cash flow excludes capital expenditures and dividends paid. The presentation of these financial measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.


Management uses these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Our management believes these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain items that may not be indicative of recurring business results including significant non-cash expenses. We believe management and investors benefit from referring to these non-GAAP financial measures in assessing our performance when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate management's internal comparisons to historical performance and liquidity as well as comparisons to our competitors' operating results. We believe these non-GAAP financial measures are useful to investors because they allow for greater transparency with respect to key measures used by management in its financial and operating decision-making.

FAIR ISAAC CORPORATION
RECONCILIATION OF NON-GAAP GUIDANCE
(In millions, except per share data)
(Unaudited)

	Previous Fiscal 2022 Guidance			Updated Fiscal 2022 Guidance

GAAP net income	$	318			350
Amortization of intangible assets		2			2
Stock-based compensation expense		115			115
Income tax adjustments		(30	)		(30	)
Excess tax benefit		(8	)		(8	)
Non-GAAP net income	$	397		$	429


GAAP diluted earnings per share	$	11.29		$	13.11
Amortization of intangible assets		0.07			0.08
Stock-based compensation expense		4.09			4.31
Income tax adjustments		(1.06	)		(1.12	)
Excess tax benefit		(0.28	)		(0.29	)
Non-GAAP diluted earnings per share	$	14.12		$	16.08


Note: The numbers may not sum to total due to rounding.

About Non-GAAP Financial Measures

To supplement the consolidated GAAP financial statements, the company uses the following non-GAAP financial measures: non-GAAP net income, non-GAAP EPS, and free cash flow. Non-GAAP net income and non-GAAP EPS exclude the impact of amortization expense, share-based compensation expense, restructuring and acquisition-related, excess tax benefit, and adjustment to tax valuation allowance items. Free cash flow excludes capital expenditures and dividends paid. The presentation of these financial measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.


Management uses these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Our management believes these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain items that may not be indicative of recurring business results including significant non-cash expenses. We believe management and investors benefit from referring to these non-GAAP financial measures in assessing our performance when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate management's internal comparisons to historical performance and liquidity as well as comparisons to our competitors' operating results. We believe these non-GAAP financial measures are useful to investors because they allow for greater transparency with respect to key measures used by management in its financial and operating decision-making.

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